LPWMG

With the DJIA dropping over 1,000 points intraday, we are seeing significant economic indicators slowing or turning negative. Key examples include the manufacturing sector, as highlighted in the recent Purchasing Managers report, and the rise in initial unemployment claims. Commentary from major consumer companies like McDonald's, Starbucks, and Procter & Gamble in their second-quarter earnings reports underscores a consistent theme: inflation is significantly cooling consumer spending. Companies no longer have pricing power, as consumers resist paying higher prices.

The Federal Reserve has indicated that risks are now balanced between inflation and employment, suggesting they will begin to cut interest rates. The Federal Funds rate is currently about 3% higher than the inflation rate, providing the Fed with ample room to lower rates. We believe the Fed will cut rates multiple times over the next 12 months.

Falling interest rates generally create a favorable environment for higher-yielding securities, quality stocks and bonds, as the value of these cash flows increases. This trend will benefit a broader range of stocks beyond just mega-cap technology. However, the market faces higher-than-normal risk due to the historically high concentration in technology stocks. We expect market volatility to be elevated through the election and plan to take advantage of this by opportunistically buying high-quality Blue-Chip stocks and smaller-cap stocks with attractive return potential.

As always, please don't hesitate to call or email with any questions.

Our Best Always,

Bob

Robert O'Braitis
CEO
Chief Investment Strategist